SHANGHAI, June 25 China's central bank has
approved plans to launch a new pilot program allowing individual
households to make financial investments overseas, state media
reported on Tuesday, in the latest sign of progress towards
capital account liberalisation.
The plan has now been submitted to the State Council,
China's cabinet, for final approval, the official Shanghai
Securities News quoted Wang Jingwu, president of the Guangzhou
branch of the People's Bank of China, as saying at the Guangdong
province Financial Work Meeting on Monday.
Guangzhou and Shenzhen will be the site of the new Qualified
Domestic Individual Investor program, known as QDII2 because it
follows on China's original program for outward financial
investment, the Qualified Domestic Institutional Investor (QDII)
The program could launch as early as July, the paper quoted
unnamed industry sources as saying.
China's currency is convertible for trade and other current
account transactions, but is tightly controlled for capital
account transactions, especially financial investment.
China launched the original QDII in 2007, allowing local
financial institutions to invest in overseas capital markets.
China had granted $85.6 billion in QDII quotas by the end of
In early May, the State Council called for the drafting of a
detailed plans to achieve full yuan convertibility and
specifically mentioned a program for individual outward
investment, but did not offer a timeline.
The selection of Guangzhou and Shenzhen for the pilot are
part of the Pearl River Delta Financial Reform Experimentation
Zone, the paper also reported.
Economists say capital account convertibility could
contribute to improved capital allocation in China by forcing
Chinese banks to compete for investor funds and giving Chinese
domestic savers more investment options, but it also raises the
risks of destabilising capital flows.
Separately, Wang also said that China's State Administration
of Foreign Exchange had chosen Guangdong as a site for a pilot
project allowing multi-national companies to centrally manage
their foreign exchange transactions, allowing them greater
flexibility in cash management, currency conversion, and
Midea Group Co , TCL Corp
and Flextronics International Ltd have been picked to
join the pilot project.
Similar corporate forex management programs are already
under way as part of a broader campaign to loosen currency
controls and promote greater international use of the